Colombia and Foreign Investment

ADVANTAGES OFFERED TO FOREIGN INVESTORS
Political stability.
Every president in the History of the country have been democratically elected, except for a short period (1953-1957). Colombia ranks first among the countries of the region in terms of consistency and transparency of government policies.

Macroeconomic stability.

  • Colombia is one of the most stable economies in Latin America.
  • It has a persistent economic growth above other countries of the region.
  • The inflation rate has increased slightly in recent years, but it has always remained below double digits. In 2014, the average inflation was 3.66%.

Human resources and competitive labor system

  • The illiteracy rate in Colombia is one of the lowest in Latin America. In addition, the country’s workforce is competitive in terms of labor costs, and it is one of the most qualified in the region.
  • The working day goes from 6 am to 10 pm. Therefore, extra surcharges or night hours are reduced.
  • There is a method to recruit apprentices from the National Learning Service (SENA) through a contract of provisional services without labor bonding to the company, so it does not have to pay social benefits.

Increasing international integration
Colombia has different Free Trade Agreements: FTA with the United States of America and the European Union, which came into force in 2013; CAN (Colombia, Bolivia, Ecuador and Peru), G3 (Colombia and Mexico), CAN-MERCOSUR-Chile and Colombia-CARICOM. Colombia also has tariff preferences with USA (ATPDEA) and UE (GSP Plus).

Foreign Investment Regime
The regime which controls foreign direct investment is based on the principles of equality, respect for national investment, universality (investment is welcomed in all sectors of the economy), automaticity (it requires authorization) and stability.

 

MAJOR SECTORS OF INTEREST FOR INVESTMENT
Since 2011, the industry that has received the largest amounts of FDI (Foreign Direct Investment) has been the oil sector; mining is located in second place. However, the Colombian administration through Proexport, now Procolombia, points out a number of sectors that, according to a report made by McKinsey, are the most potential in the country:

  • Agricultural industry (forest biofuels); availability of unused land and natural resources wealth.
  • Automotive; Colombia is a great place for manufacturing and assembly of vehicles.
  • Cosmetics; there are great opportunities for research & development centers, distribution centers and production of items.
  • Building materials; one of the activities with great influence on the development of the country.
  • Software and IT services; for their low costs, especially call center industry.
  • Business Process Outsourcing; Sexy local market, a workforce of high-level available and a strategic position.
  • Private equity funds.
  • Leisure and tourism; big hotel franchises are investing in Colombia.
  • Oil goods and services; with a growing local demand.

The report also highlights the attractives related to the construction industry and engineering, both in infrastructure and in building. Colombia is carrying out an ambitious plan to build transport infrastructure. Housing need, especially social, make this sector also one of the most dynamic of Colombian economy.

 

MANUFACTURING FOR EXPORTATION OR FOR THE LOCAL MARKET?
Interestingly, leverage production costs in Colombia and the strategic position of the country help to reach foreign markets but there is also great commercial potential and a emerging market within the country. Trade Agreements which were signed recently, have opened exciting opportunities to produce items in order to export them, especially to the United States.

There is also the possibility of using Free Zones, which are one of the most important mechanisms to be considered by foreign investors for the development of a commercial project in Colombia; because of the benefits them provide, the possibility to export or sell in the local market and the opportunities to increase profitability by reducing costs.